The term “mechanic’s lien” is foreign to many homeowners, but it is a very important one that everyone should understand. If you are planning to renovate or remodel your home, or even if you are planning an addition, understanding and planning for a mechanic’s lien is a vital part of the process.
What It Means
A mechanic’s lien is essentially a lien against your property that provides contractors and materials suppliers the ability to take legal recourse in the event you do not pay for services provided. For example, if you hire a contractor to remodel your kitchen, but the contractor is not satisfied with the payment received for time and materials, he or she may be able to place a mechanic’s lien against your home. Though the exact laws regarding these liens vary from state to state, for the most part, these liens allow the contractors to place a cloud on the deed to your home and essentially force you into foreclosure.
Other Situations that May Result in Mechanic’s Liens
Most homeowners believe they can avoid mechanic’s liens by simply paying their contractors on time, but in some states, this is not enough. As another example, in some states, if you pay your contractor but your contractor fails to pay the individual laborers and workers who provided the services in your home, those workers may file for a mechanic’s lien on your property. The only way to resolve this is to pay the workers, which may result in double payment on your part. It seems odd that state governments would allow for such a thing, and it may make you think twice about your next remodel or renovation project. Fortunately, there are ways to protect yourself.
How to Avoid a Mechanic’s Lien
Though these liens sound pretty scary, there are a few ways you can protect yourself. In fact, most lenders assist you in this protection when they distribute payments to contractors. Most of the major construction lenders – including banks – will secure lien waivers. When the contractors and workers sign these waivers, they forego their rights to secure mechanic’s liens against you in exchange for a guaranteed payment schedule. Other things you can do to protect yourself include:
- Selecting your contractor carefully. Be sure to research contractors and contact past clients to ensure their reputations.
- Responsibly managing your project. Before signing any contracts, be sure all the costs you will incur are listed in detail. What’s more, be sure all payments are delivered to your contractor on time.
- Adding lien clauses to your contract. Your project contract should ensure that the contractor is responsible for payments and costs that might arise from lien disputes. This absolves you from fees and extra costs.
If you are concerned about your home construction project and you want to ensure that you have taken all the right precautions, contact the Estridge Group today. With years of experience in the industry, and as a member of the Top 5 in Real Estate Network, they have the knowledge and expertise to ensure your projects run smoothly from start to finish.